Achieving Inventory Accuracyapicsorlando.com/documents/presentations/jerry kilty inventory... ·...
Transcript of Achieving Inventory Accuracyapicsorlando.com/documents/presentations/jerry kilty inventory... ·...
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Achieving Inventory Accuracy
G.L. (Jerry) Kilty, CFPIM, CIRM, CSCP727 [email protected]
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Two Messages Today
Data must be accurateBest way to audit records
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Is your company taking a periodic inventory?
Yes No
0%0%
a. Yesb. No
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Is your company doing cycle counts?
Yes No
May
be
0% 0%0%
a. Yesb. Noc. Maybe
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Data Integrity
Customer data basesSuppliers data basesBills of materialsInventory records
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Data Integrity
Lead time dataCapacity dataInformation flows
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Inventory Accuracy Calculations
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Part Shelf Inventory No. Count Record
1 95 1002 99 1003 101 100
Total 295 300
Inventory Accuracy Calculations
Accuracy = 295/300Or 98.3 %
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Part Shelf Inventory Accuracy No. Count Record Calculation
1 95 100 95 % 2 99 100 99 % 3 101 100 99 %
Total 295 300
Inventory Accuracy Calculations
Accuracy = Avg. of the threeOr 97.7 %
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Inventory Accuracy Calculations
1. Financial ($$$$)2. Planning (Units with tolerances)3. Production (Units w/o tolerances)
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Part Unit Shelf Inventory AdjustmentNo. Cost Count Record Unit $$$$1 $ 10 95 100 - 5 - 502 $ 30 99 100 - 1 - 303 $ 80 101 100 + 1 + 80
Total 295 300 0
Financial ($$$)
No FinancialAdjustment100 % Accurate
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Part Toler- Shelf Inventory Within OutsideNo. ance Count Record Tolerance Tolerance
1 7 % 95 100 X2 3 % 99 100 X 3 0 % 101 100 X
Total 295 300
Planning (Units w. Tolerances)
Accuracy = 2/3Or 67 %
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Part Shelf Inventory No. Count Record
1 95 1002 99 1003 101 100
Total 295 300
Production (Units)
Accuracy = 0/3Or 0 %
WrongWrong
WrongWrongWrongWrong
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Sigma Levels
Level654321
Defects per Million3.42336,21066,807308,537690,000
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Which method of measurement does your company use?
Fina
ncial
Plan
ning
Pro
ducti
on A
ll of a
bove
Don
’t kno
w
0% 0% 0%0%0%
a. Financialb. Planningc. Productiond. All of abovee. Don’t know
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Auditing the Records
The annual physical will adjust the recordsCycle counting will correct the problems!
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Why take a Physical Inventory?
FINANCIAL!
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Physical Inventory
ExpensiveTime consumingExhaustingCreates more inaccuracies
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Cycle Counting
The Solution!
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Cycle Counting
Sample countsEvery dayInvestigate as to causeTrained personnelCorrective action implemented
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Cycle Counting Methods
1. Count and adjust2. Quick fix3. Long lasting accuracy
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
1. Count and Adjust
Popular, but not effectiveDoes not correct the recordDoes not identify problemsDoes not replace the need for a physical inventory
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
2. Quick Fix
Report honestlyDon’t use random generatorsSelect with a bias for improvementCycle Counting Done Right
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Cycle Counting Done Right!
A specific approach to fix serious accuracy problemsA 5 - step method
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Select Control Sample
Count Sample
Measure and Record Accuracy
Investigate Causes
FIX the PROBLEM
1
2
3
4
5
Select based on degree of problems; No Tolerances
Count each weekUntil perfect
Be Brutally Honest
Root Cause Analysis
Sustain the Improvement
The 5 Step Quick Fix Process
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Quick Fix Method Summary
If record accuracy is below 95%Control sampleCount on a periodic and frequent basisMeasure & investigate as to causePerformed by trained personnelCorrective action implementedDoes not replace physical inventories
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
3. Long Lasting Accurate Inventory Records
Accuracy maintenanceCount frequency determined– “A” = 12– “B” = 4– “C” = 2
Does replace the annual physical inventory!
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
ABC Classification
20% of the items = 80% of the value30% of the items = 15% of the value50% of the items = 5% of the value
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Cycle Counting Frequency
“A” = 12 4“B” = 4 2“C” = 2 1
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
Cycle Counting vs. Physical Inventory
Cycle CountingInvestigates the causes and fixes themRequires continuous effortRequires trained personnel
Physical InventoryDoes not do a cause analysisIs exhaustive when done, but over a short timeEverybody is involved
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
What’s your Company’s Inventory Accuracy?
99 –
100%
97 –
98%
95 –
96%
Low –
95%
Don
’t kno
w
0% 0% 0%0%0%
a. 99 – 100%b. 97 – 98%c. 95 – 96%d. Low – 95%e. Don’t know
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Advancing Productivity, Innovation, and Competitive SuccessThe Association forOperations Management
The End
Thank You!
G.L. (Jerry) Kilty, CFPIM, CIRM, CSCP727 [email protected]